The Rs 8,400-crore initial public offering (IPO) of SBI Life Insurance Company sailed through on high demand from institutional investors.

The country’s leading private life insurer’s IPO, however, failed to enthuse retail investors and high net worth individuals (HNIs), with shares in these two categories remaining undersubscribed.

The 88.2-million share offer got bids for 314 mn, about 3.6 times. Nearly 85 per cent came in the qualified institutional buyer segment. The retail portion of the IPO saw 82.5 per cent subscription and the HNI investor portion was subscribed 70 per cent.

The low demand from retail and HNIs was on concern that the “richly priced" IPO might not result in any short-term gain, said market players. Investment bankers handling the offer said the retail demand was decent, considering the size. In terms of value, the retail portion generated demand worth Rs 2,143 crore. Total retail applications were close to a million, said bankers.

Most brokerages had advised their clients to subscribe to the offering with a long-term investment horizon. The price band was Rs 685 to Rs 700 a share. At the top end, SBI Life was valued at Rs 70,000 crore, about 12 times its price-to-book and 73 times its 2016-17 earnings. The offer was priced at 4.2 times its embedded value (EV) for FY17. Close peer ICICI Prudential Life currently trades at around 3.8 times its EV for FY17.

“While the valuation looks higher compared to other listed financial companies (like NBFCs and private banks), we believe the premium valuations are justified,” brokerage Motilal Oswal had said. “Given that the current valuations are mature, investors can subscribe to the issue from a long-term perspective. However, it must be noted that, insurance being a steady business, it might not attract major listing gains,” added a note from Centrum Broking.

Brokers said tepid grey market premiums discouraged many HNIs from applying. The shares, they said, were quoting at a premium of less than five per cent. Total HNI demand was less than Rs 800 crore.

The IPO was an offer for sale by State Bank of India and BNP Paribas. SBI sold shares worth Rs 5,600 crore and BNP worth Rs 2,800 crore. It was the biggest since Coal India’s Rs 15,300-crore offering in October 2010.